NYC Multifamily Is Luring Investors Back From The Sun Belt
As apartment rents stagnate in Sun Belt states that enticed capital during the pandemic, investors are following the fundamentals and increasingly keying in on New York City multifamily.
With its strong rent growth for free-market apartments, paired with a crippling shortage of housing and scant competition, NYC is outshining other multifamily markets. Plus, borrowers are finding a more competitive lending landscape to get fresh debt on amenable terms.
“For a few years, we were doing a tremendous amount of work in the Sun Belt states — North Carolina, South Carolina,” Peter Borock, co-chair of Greenberg Traurig's New York Real Estate Practice, said at Bisnow’s New York Multifamily Development and Investment Conference last week. “A lot of that capital is coming back.”
Renting an apartment in NYC has never been more expensive. Median monthly rents in Manhattan hit $5,000 in February for the first time in the city’s history, according to a Corcoran Group report, representing a 6% increase from a year prior.
NYC’s 1.4% vacancy rate and high demand mean that rent growth has “surpassed other markets,” Global Holdings’ Senior Vice President and Head of Investments Josh Feder said onstage at Convene 237 Park.
Consequently, lender enthusiasm is back in the city, fueling a wave of new construction, Borock said. A recent Real Estate Board of New York report shows a 201% increase in construction starts in Q4 last year compared to a year prior.
Sun Belt metros, meanwhile, are seeing rents fall as construction that kicked off in the post-pandemic years hits the market.
Rents have dropped by 7% over the past year in Austin, 4.9% in Phoenix and 3.1% in Charlotte, according to RealPage Analytics’ February data. And rents could drop further: Apartment inventory grew by at least 5% in each of those cities during 2025, according to RealPage.
But while that glut is putting landlords and lenders in those markets in a bind, Feder said NYC is experiencing the opposite.
“There hasn't been a concession problem, which most of the Sun Belt markets are facing,” he said. “Investors can get a clearer lens to revenue growth and downside protection that you can't get in some of these other Sun Belt markets.”
Private investment firm Vistria Group — whose website says it had $2.5B in assets under management a year ago, with more than 7,000 units in the U.S. and Europe — has seen its NYC assets perform particularly well, said Sherry Wang, a partner at the firm.
Vistria’s NYC portfolio is somewhere between 98% and 99% occupied, compared to, at most, 86% in Chicago and Atlanta and the high 80s in Washington, D.C., she said. One of the fundamentals pushing occupancy high in NYC is the scarcity of land to build on in the metro area.
“I think that's an absolute tragedy when we think about housing affordability,” Wang said. “But it does prevent some of the competitive supply issues that you see in a lot of these smile states, where supply amazingly, naturally meets and often exceeds the demand for a period of time.”
While interest rates are still elevated compared to the last two decades, owners of market-rate NYC apartments are being offered lower rates for bank debt with spreads coming down as lenders jockey for position.
“I would say it's very competitive out there,” Northern Trust Bank Senior Vice President and Senior Banking Officer Chris Mitchell said. “You might see 10 to 15 bids on a property.”
Global Holdings recently experienced what it's like to have multiple lenders queuing up, Feder said, with its refinancing process for two luxury Manhattan multifamily properties: the 123-unit Anagram Columbus Circle and the 392-unit Anagram NoMad.
It refinanced the Anagram Columbus Circle in November with $190M from JPMorgan Chase and Sumitomo Mitsui Trust Bank and the NoMad tower with a $249M Freddie Mac loan last summer.
“I think we saw probably the healthiest bid sheet we've seen in years,” Feder said. “The diversity of lenders, from bank balance sheet loans to debt funds to life [insurance companies] — there was real depth and diversity to the market.”
But lender appetite still depends on how much of the asset is subject to rent stabilization, investors and developers said onstage. For properties with a higher ratio of rent-stabilized units, it’s a different conversation altogether.
The threat of a four-year rent freeze under Mayor Zohran Mamdani has changed the lenders' approach to deals.
“In New York, we're underwriting zero growth for rent-stabilized properties for four years,” Wang said. “That might be too conservative, but we're underwriting zeros.”
The troubles for these properties predated the administration, and some lenders have retreated entirely from the market. In 2019, more than $27B of loans were originated to NYC rent-stabilized apartments, according to credit intelligence platform Atrium Data. Five years later, total rent-stabilized lending was less than $5B.
Stabilized rent uncertainty trickles down to debt funds, bridge lenders and private equity firms’ appetite to provide acquisition and construction loans, lenders said onstage. As a result, lenders that are willing to consider offering debt to buildings with a high proportion of rent-stabilized units are now doing so with significant caveats, Northern Trust Bank's Mitchell said.
Instead of industry-standard interest-only loans with complete interest, lenders are now saying they want amortizing loans if the assets they’re lending on aren’t going to see rent growth.
“We have to understand: Can the sponsors themselves be able to rightsize a loan if they need to pay down some of the debt?” Mitchell said.
Additionally, the political risks stemming from whether the Rent Guidelines Board will freeze rents in the city’s one million stabilized units has made lenders reluctant to even touch the asset class.
“It's like asking me what the lottery numbers are going to be tonight. If I told you something, I'd probably be full of it,” said Justin Piasecki, president of real estate investment firm George Smith Partners. “Nobody really knows what's going to happen.”
